Long gone are the days of working for the same organisation for decades at a time. Traditional employment models are rapidly being turned on their head, making way for a more flexible and dynamic workforce. In the UK alone, there are over 2 million freelancers contributing £119bn to the economy each year. As more and more professionals pursue their own ventures, choosing the path of consulting or non-executive directorships, for example, the more important it becomes to raise awareness of the challenges inherent to self-employment.
IPSE has been on the forefront of the discussion around self-employment since 1999 (when, until 2014, we operated as PCG). From our humble beginnings we have grown to represent over 67,000 independent professionals, with 22,000 making up the IPSE membership community. For this community we provide representation into Government and a broad safety-net of insurances. As those of us who are self-employed know all too well, going it alone can be rewarding but is also not without difficulties.
One of the scarier obstacles independent professionals will have to contend with is the Intermediaries Legislation, more commonly referred to as IR35. For those of you who have yet to come across IR35, it is the Government’s tax avoidance scheme aimed specifically at the self-employed. If you are investigated and deemed to be within IR35, as more and more independent professionals are, you could be faced with a massive tax bill (average of £50,000) and a change in your tax status for future work.
So how do you protect yourself from being deemed as inside IR35? This is the million-dollar question, and it is hard to answer due each engagement being judged on its own merits. However, in essence it all boils down to control – namely how much control the end client has over you as an independent professional. Can the end client demand you wear a uniform? Do they have control over your working hours and schedule? Will they accept you sending a substitute to carry out the work, or do they require you specifically to carry out the work? These are the kind of questions an IR35 investigation will ask, and to protect yourself, you will have to provide evidence that these questions do not apply to your engagements.
While taxation is an area rife with challenges for the self-employed, financial wellbeing in general becomes much more hands-on when working for yourself. Without an employer contributing to your pension plan, providing holiday and sick pay, or even maternity leave, an independent professional has to make these arrangements themselves in order to ensure continued financial wellbeing into retirement. One of the core pillars of our work at IPSE is to raise awareness of the importance of planning for financial wellbeing, as well as to provide the tools needed to achieve this security.
To find out more about how to protect yourself from IR35 and plan for your future financial wellbeing, head over to the IPSE website and have a look at our various resources. More specifically, give our Guide to IR35 and Guide to Freelancing a read to gain a better understanding of how to set up for success and ensure your contracts are IR35 compliant.